The economic regulator of the health service has ruled out tax exemptions for private firms that deliver NHS services.

Reports this week had suggested Monitor was to propose that commercial providers should not have to pay corporation tax, in order to ensure fair competition for health service contracts between private firms and NHS hospitals.

But the regulator said on Tuesday recommendations on tax exemption would not be part of a government-commissioned review of NHS competition expected to be completed by the end of March.

It said: "Monitor has yet to decide what recommendations it will make to the secretary of state. However, in the light of recent media speculation, Monitor has decided to clarify the position on one specific issue. While it is the case that corporation tax is one of many distortions that the review is looking at, Monitor will not be recommending that private sector providers should be exempt from paying corporation tax."

Private sector and charity providers have argued that public sector hospitals have an unfair advantage in healthcare markets because they are exempt from paying corporation tax. This, coupled with other pensions and capital "distortions", leaves them with costs that are £14 higher for every £100 of cost relative to NHS providers.

Opponents say it is unacceptable for providers who seek to make a profit out of NHS work to claim it is unfair that they should pay tax on those profits. Critics said this week they feared Monitor had been "captured" by the private health lobby.

In a letter to the Guardian, Monitor's chief executive, David Bennett, said no drafts of the competition report had been written. He wrote: "Monitor has received representations concerning tax from providers from the charitable sector as well as the private sector.

"In addition, we have received representations that other factors disadvantage the public sector, such as complying with [Freedom of Information] requirements or employee benefits. We have had responses and held detailed conversations with providers from all sectors and we are taking time to analyse the evidence before drawing our final conclusions."

He added: "Monitor has a statutory duty to promote and protect the interests of patients and any suggestion that we are working on behalf of the private sector misrepresents our core duty."